Controlling the cost of cost control
By Richard E. Ralston
web posted June 6, 2005
The cost of health care will continue to rise for a number of good
reasons. We are living longer, and the retirement of the baby
boom generation will increase demand on health care. Cutting-
edge technology and new drugs will improve the quality and
length of life-but at high cost. The irony, however, is that the
efforts to limit costs will actually increase them more rapidly. We
have created a bureaucratic monster that none of us can afford.
This is the inevitable result of any "third party" payment system.
When payment is separated from those receiving a service,
demand expands much faster than supply. Insurance companies
receiving health insurance premiums from individuals or
employers can't pay for everyone's health care no matter what it
costs. They have to establish limits on the nature and amount of
health care provided. High deductibles for coverage,
aggressively negotiated group rates for services, and usage
restrictions on the most expensive drugs and procedure can only
slow the hemorrhage, not stop it.
When government intervenes in health care it makes the problem
much worse. Medicare regulations currently exceed 130,000
pages. No hospital, physician, or patient can read or understand
them. It is probably impossible for any health care provider to
comply with some provisions of these regulations without
violating other provisions.
A couple of years ago, ABC News reported that the Duke
University hospital system had more employees in their billing
department than they had doctors and nurses. If your hospital bill
includes a charge of $25.00 for an aspirin, it's not because they
have to pay that to a drug company. Nor does your doctor get a
commission on aspirin sales. It's because of the system's
administrative costs, which exist as a vain effort to control costs.
Hundreds of thousands of administrators must certify that you've
acknowledged that they're protecting your privacy as they place
your health records on government computers. They must also
decide what procedures are allowed, what can be charged for
those procedures, how to ration them, which facilities are
allowed to order new equipment, how many unnecessary
medical tests to order to cover themselves against frivolous
litigation, how much liability insurance they need and how to add
it to their overhead, and how to protect themselves from
prosecution if they code Medicare forms incorrectly.
Fearful of producing too many doctors, one of the greatest
recent successes of regulators has been a deliberate reduction in
the number of graduates from medical schools and teaching
hospitals. Unfortunately, as it turns out, there are not enough
doctors. And people wonder why the increase in health care
costs in the last forty years is in direct proportion to increased
government intervention in health care.
All of this is the necessary result when an illusion comes into
contact with reality. We may all wish that someone else would
provide us with all of the health care we desire. But no employer,
no insurance company, and no government can afford to do that.
Each individual and each family must place a priority on
providing themselves with the highest quality health care they can
afford. (What, after all, should have a higher priority?) Decent
government policy can make this affordable for the maximum
number of people through Health Savings Accounts and tax
deductions for high-deductible insurance policies. Policymakers
can also eliminate the tremendous administrative expenses that
have been created by the heavy hand of government. That will
do more to keep the cost of health care within reach than any
regulation, law, or bureaucracy. But the ultimate responsibility is
our own.
The only real alternative is the most likely one-to force everyone
into a uniform system tightly controlled by the government. Paul
Krugman, writing in The New York Times, denounces the only
obstacle to this as "ideology." He defines ideology as
"competition and personal choice." He is quite correct. All we
need to do is jettison freedom, and government can take over.
If this happens, one day you'll discover that a government that
provides and pays for all of your health care has come to think
and act as if it owns your body. Otherwise, you'll be free as a
bird.
Richard E. Ralston is Executive Director of Americans for Free
Choice in Medicine (www.afcm.org).
Enter Stage Right -- http://www.enterstageright.com